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Airbnb, My $1B Lesson

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Re: Airbnb, My $1B Lesson

#81

Post by jacques_chester »

hhandoko wrote: post #77
jacques_chester wrote: post #38

Earlier quoted context omitted.

I imagine that everyone's recollections differ. I'd hate to speculate. Edit: I seem to have touched a nerve, but I don't know what it is. Can someone explain what I said that caused annoyance? I have the usual embarrassing secret obsession with made up internet points.

I didn't downvote you... But they way you worded it seems to suggest that the VC wasn't telling the truth. At this stage, he has the benefit of the doubt.

That seems reasonable. I've been in situations where people simply recall events differently, without any sense of intending to deceive.

Re: Airbnb, My $1B Lesson

#82

Post by hhandoko »

paigecraig0231 wrote: post #70
staunch wrote: post #42

Earlier quoted context omitted.

They probably shook hands after a meeting, as one always does. That is not a "handshake deal". Airbnb probably had similarly positive meetings with dozens of investors. All of them probably talked about doing the deal soon. He's known for being bold and writing checks on a first meeting. Why didn't he write a check to Airbnb after months of haggling? YC, or any other investor, was free to come along and close the dea…

exactly! I spent three weeks haggling - I should have figures out terms in 24 hours or less or simply given them a check and let it ride into future terms.

Hello and welcome to HN!

Is it prudent though? I understand the need for expediency, but surely you need to do some due diligence?

Re: Airbnb, My $1B Lesson

#83

Post by DanBC »

jacques_chester wrote: post #81
hhandoko wrote: post #77

Earlier quoted context omitted.

I didn't downvote you... But they way you worded it seems to suggest that the VC wasn't telling the truth. At this stage, he has the benefit of the doubt.

That seems reasonable. I've been in situations where people simply recall events differently, without any sense of intending to deceive.

This is a really important point that many people are strongly resistant to.

False memory is a thing and many people refuse to accept that it could happen to them.

http://www.bbc.co.uk/news/science-environment-24286258

(There was a radio programme this week that demonstrated the process of giving someone a false memory. I would post a link but First Great Western (the train I'm on) blocks a bunch of BBC website.)

Re: Airbnb, My $1B Lesson

#84

Post by tomcam »

hhandoko wrote: post #82
paigecraig0231 wrote: post #70

Earlier quoted context omitted.

exactly! I spent three weeks haggling - I should have figures out terms in 24 hours or less or simply given them a check and let it ride into future terms.

Hello and welcome to HN! Is it prudent though? I understand the need for expediency, but surely you need to do some due diligence?

Man, I want to hear the answer to this question. I got screwed royally as an angel investor because I was too quick to write a check.

Re: Airbnb, My $1B Lesson

#85

Post by arasmussen »

Thanks so much for writing this, I love learning about cases where seemingly concrete rules can be bent. Take a look at Uber who is constantly being told that what they're doing is illegal and their response is essentially "but it's better so the laws need to be fixed". I think that's the same attitude you want when doing everything you can to get back in the deal. Always be optimistic and don't give up to soon.

Re: Airbnb, My $1B Lesson

#86

Post by jsprogrammer »

philwelch wrote: post #78
jsprogrammer wrote: post #71

Earlier quoted context omitted.

Yes, an eager investor might interpret that as acceptance. >1. The investor says “I’m in for [offer] .” >2. The startup says “Ok, you’re in for [offer] .” You'll notice that the startup has only repeated back what the investor said, correcting for the inverted subject-verb and adding a customary signal opening. The startup has confirmed receipt of the investor's signal. >3. The startup sends the investor an email or…

I can see how you interpret it that way, but since this is a published "handshake deal" protocol, I'm not sure that's how it's meant.

Precisely why it should be improved.

Re: Airbnb, My $1B Lesson

#87

Post by paigecraig0231 »

napoleond wrote: post #41

Let me get this straight: in June 2008, Airbnb got intro'd to a bunch of investors, who all said no [1]. In September of 2008, Airbnb had a $250k round on the table that valued them at 2.5M[2]. And then, also in September 2008 (before YC usually does interviews) they rejected that offer for YC, who ended up giving them $20k[3], with a valuation presumably around $250k?? (Although Brian Chesky says that didn't happen…

It's not weird at all. Brian talked to a ton of people over many months. He was raising many months before I met him. And then I came in. I then spent too long negotiating but then we finally worked out a deal end of Sep and then my lawyers and their lawyers negotiated the agreement Sep 26th and then we did our dinner. But then YC smartly moved in after this closing dinner and booted me out. Funny enough Justin Kan and I ended up in Vegas a few years later at a tech party at Caesars hotel and had a good laugh about it. He remembered me as the crazy Marine who was writing a huge check into Airbnb before they elbowed me out. This isn't unusual - they probably googled me at the time (back then all of the results would have been stories about iraq, Syria, afghanistan, Pakistan operations; black operations and crazy shit). They probably thought they were protecting Airbnb and keeping dumb money out of the cap table. It's quite common for good investors to strongly advise you not to take dumb money and I agree with the practice.

And that goes back to one of the lessons from my post. I realized that for founders and investors to take me seriously and not lose deals I had to prove myself, build a positive brand by helping founders and getting smarter about this new world I was operating in.

Re: Airbnb, My $1B Lesson

#88

Post by Beltiras »

jsprogrammer wrote: post #61
paigecraig0231 wrote: post #59

Earlier quoted context omitted.

You guys are missing the point. AirBnB didn't screw me over - this wa any first deal and I screwed around debating stupid points. I was disappointed they didn't do the deal but this whole post is about lessons learned. And one of the biggest ones was move fast once you have conviction. At the time of this Airbnb event I was just learning. I thought an investor had to worry about all these little details, negotiate to…

Well, if it did fall apart at the literal last hour and you were going to sign the formal paper work (which only reiterates the terms already negotiated and agreed to at dinner) the next day, but didn't because YC came in overnight and took the entire round...then it does sound like you got screwed.

His general approach does indicate that belief in the product is paramount, his trust in the team second. The takeaway is not to yank the chain too hard negotiating when these two criteria are met. He could have closed a week before.

Re: Airbnb, My $1B Lesson

#89

Post by pitchups »

It is interesting and a bit ironic that AirBnb accepted funding from YC - who did not believe in their idea [1], and rejected the only investor that not only believed in their crazy idea, but actively sought them out and tried to woo them. Did they go with YC because of its brand, name recognition, or because it offered them better terms?

Of course, it is all counterfactual, but could Airbnb have been as successful had they not joined YC? Recall that PG told them to do things that do not scale - by taking professional photos of rentals in NY - which may have been critical to their early success.

And although PG was initially skeptical of their idea, he quickly changed his thinking about how big Airbnb could become. Revealed in another interesting trail of emails exchanged between PG and Fred Wilson (who also passed on Airbnb). [2]

[1] "In fact, when we funded Airbnb, we thought it was too crazy. We couldn't believe large numbers of people would want to stay in other people's places"

http://www.paulgraham.com/founders.html

[2] http://www.paulgraham.com/airbnb.html

http://avc.com/2011/03/airbnb/

Edit: spelling

Re: Airbnb, My $1B Lesson

#90

Post by jondubois »

If YC hadn't invested, nobody would have ever heard of AirBnb. This is a case where the investor added a great deal of value to the business.

YC is at the center of a large network of investors, startups and bloggers and somehow its investment decisions ultimately influence the habits of technology consumers in general.

I think it was a lose-lose situation for the author.

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